Correlation Between Retail Estates and INDIKA ENERGY

Can any of the company-specific risk be diversified away by investing in both Retail Estates and INDIKA ENERGY at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Retail Estates and INDIKA ENERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Retail Estates NV and INDIKA ENERGY, you can compare the effects of market volatilities on Retail Estates and INDIKA ENERGY and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Retail Estates with a short position of INDIKA ENERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and INDIKA ENERGY.

Diversification Opportunities for Retail Estates and INDIKA ENERGY

0.91

Correlation Coefficient

Retail Estates  INDIKA ENERGY

Almost no diversification

The 3 months correlation between Retail and INDIKA is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and INDIKA ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDIKA ENERGY and Retail Estates is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Retail Estates NV are associated (or correlated) with INDIKA ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDIKA ENERGY has no effect on the direction of Retail Estates i.e., Retail Estates and INDIKA ENERGY go up and down completely randomly.

Pair Corralation between Retail Estates and INDIKA ENERGY

Assuming the 90 days horizon Retail Estates NV is expected to under-perform the INDIKA ENERGY. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates NV is 3.21 times less risky than INDIKA ENERGY. The stock trades about -0.03 of its potential returns per unit of risk. The INDIKA ENERGY is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6.30  in INDIKA ENERGY on September 29, 2024 and sell it today you would earn a total of  1.20  from holding INDIKA ENERGY or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Retail Estates NV  vs.  INDIKA ENERGY

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

INDIKA ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INDIKA ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Retail Estates and INDIKA ENERGY

The main advantage of trading using opposite Retail Estates and INDIKA ENERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates position performs unexpectedly, INDIKA ENERGY can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in INDIKA ENERGY will offset losses from the drop in INDIKA ENERGY's long position.

The idea behind Retail Estates NV and INDIKA ENERGY pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.